THE DEVELOPMENT

OF PUBLIC FINANCE
TOPIC III
FM ELEC 3 - PUBLIC FINANCE
 OBJECTIVES
To understand how the Public

Contents 01 Finance was developed.

To understand how
02 02
01 03 Mercantilism emerge and
its important contributions
The Emergence of Physiocracy
The Beginnings To learn what Physiocracy
Mercantilism: 03
Some important is and Physiocrats' beliefs

Contributions
04 05 To understand the Depression
04 and the Keynesian Economics
The Depression and The Philippine
Keynesian Economics Setting To determine the Phillippine
05 setting in terms of Public
Finance
 The Team

Marjorie C. Faustinn John R.

Bandoquillo Tacuboy

Ruffa Mae C. Marianne P. Regine B. San

Calivara Fortunado Juan
OVERVIEW
 Introduction
The development of public finance institutions
merely reflects the development of organized
society, particularly the state.
Public finance raises and spends revenues for the
functions of the state. These functions have been
changing with the development of society.
A. ANCIENT FINANCE: The Slave Societies

EXPENDITURES

Ancient public finance was therefore characterized by

enormous public expenditures for defense and aggression.

Peace and order for the ruling minority was also a

primary concern which makes the preservation of internal
peace, order, and security the second primary function of
ancient government.

The third function was the maintenance of a

state religion.
A. ANCIENT FINANCE: The Slave Societies

EXPENDITURES

The fourth function was the maintenance of the

King and his household.

In the slave societies , it was also a common

practice to construct and maintain public works.

Lastly, distribution of free grain in times of famine,

public recreation, and physical education were also
included.
 REVENUES
The only sources of income for the slave state
were typically looting and tributes from
conquered people, war chests, penalties, and
direct taxes imposed on non-citizens of the state.
Donations and gifts from the state’s wealthiest
residents made up the other sources of income.
 BUDGETING
Budgeting was used because it was necessary to
distribute public funds for particular uses. There
was no separation between the king’s private and
public spending because the national budget and
his personal funds were combined.
 BORROWINGS
The ancient state did not borrow money even in
emergencies. It only solicited gifts or levied
limited taxes.
 AUDITING
Since ancient public finance was limited to tax and
expenditure aspects, state audit was primarily
concerned with the maintenance and inspection of
financial records to ensure the regularity of
accounts and the legality of expenditures.
B. MEDIEVAL PUBLIC FINANCE

The evolution of medieval public finance paralleled the

changes in the state’s political structure inextricably. These
changes included the beginning of the medieval period’s
weakening of monarchy, the development of feudalism,
and the emergence of limited monarchy at the end of the
era.

During the feudal era, taxation was closely linked to the

ownership of land. Feudal lords collected tributes from
peasants in exchange for protection and the use of land. This
marked a continuation of organized revenue collection for
communal purposes.
Emergence of 4 KEY FEATURES:
Mercantilism Bullionism Colonialism
It was an economic theory and
and Expansion
practice that dominated Europe It expanded the use of It showed the real
from the 16th to the 18th centuries fiscal instrument (tax, economic prosperity of a
budget) to guide nation laid on
It emphasized the accumulation of development of
wealth and resources within a economic activities
agriculture and industry,
nation by promoting exports and towards prosperity. not on acquisition of gold
limiting imports. only.

Trade
Regulation
The concern of the
mercantile state to preserve
the increase its wealth by
active export and
corresponding restriction on
imports through high tariffs.
Role of
Government
It highlighted the necessity
of state intervention in the
economy of the
mercantilist country.
Physiocracy
"physis" (nature) and
"kratia" (rule or power)
 Physiocracy emerged in
the 18th century during
the Enlightenment era.
Origin and
Founders:
Founded by François
Quesnay, a French
economist and physician.
 Laissez-faire
The physiocrats
believed in Productive Labor
several
fundamental Single Taxation
principles:
Circulation of Wealth
 Laissez-faire
Advocated minimal government
intervention in the economy, allowing
natural economic laws to govern
economic activities.

Productive Labor

Stressed agriculture as the

primary source of wealth due to
its ability to produce a surplus
beyond subsistence.
 Single Taxation
Proposed a single tax on land
rents (impôt unique) to fund
government activities, as land
was seen as the source of all
wealth. Circulation of Wealth

Emphasized the importance of

wealth circulating through the
economy, benefiting different
sectors and individuals.
 Agriculture as Key

Physiocrats believed that agricultural

production was the only productive
economic activity, generating a
surplus (net product) that supported
other sectors.
 Government Revenue

Advocated for the single tax on

land rents as a means to fund
government activities without
hindering productive sectors
Decline and Influence:

Physiocracy's influence waned in the late 18th century, as other

economic theories gained prominence. Despite its decline, some
principles, like limited government intervention and emphasis on
productive activities, remain relevant.
Legacy and Modern Relevance:

While not widely accepted today, physiocracy contributed to the

development of economic thought and influenced discussions on
economic policy and theory. Some of its ideas continue to resonate,
particularly the role of agriculture in generating wealth and the
importance of allowing certain economic activities to operate
freely.
KEYNESIAN
ECONOMICS AND
THE DEPRESSION
• Keynes provided an explanation
for the prolonged depressed
conditions of the 1930's.

• The Depression had such a long period

of time where labor markets did not seem
to come into equilibrium.
• The Depression was a
combination of factors that would
boost our economy today just as
well.

• In 1936, British economist John Maynard

Keynes wrote the General Theory of
Employment, Interest, and Money.
• Keynesians do not think that the Typical
value of unemployment is deal-partly
because unemployment is subject to the
caprice of aggregate demand, and partly
because they believe that prices adjust only
gradually.
THE PHILIPPINE
SETTING
Discussant:
San Juan, Regine B.
Philippine Setting

specific economic, social, and

political circumstances that are
unique to the Philippines.
In terms of Public
Finance
it means examining how the
principles, theories, and practices of
public finance apply and are adapted
to the country's specific conditions
and challenges.
Financial Management and Activities of the Philippine
Government
1. Taxation
2. Government Spending
3. Resource Mobilization
4. Public Debt Management
5. Decentralization
 1. TAXATION
considering the most appropriate
tax policies and tax rates given the
economic disparities and income
distribution in the Philippines.
 Revenue Generation
Taxes collected by the Philippine
government contribute significantly to its
revenue. .

Budget Allocation:
The government allocates funds collected
through taxation to different sectors based
TAXATION AND on the country's development goals and
priorities.
PUBLIC FINANCE
Tax Collection Efficiency
Effective tax collection mechanisms are
crucial for generating revenue.

Tax Compliance:
Encouraging tax compliance is important for
maximizing revenue.
 2. Government
Spending
Addressing the allocation of government
resources to various sectors like education,
healthcare, infrastructure, and social
welfare programs, keeping in mind the
country's development goals and
challenges.
 Public Expenditure Allocation

Government spending encompasses a wide

range of areas, including education,
healthcare, infrastructure, defense, social
welfare, public administration, and more.
GOVERNMENT
SPENDING AND
Economic Stabilization
PUBLIC FINANCE Government spending can be used as a
tool for economic stabilization.

Public Goods and Services:

Government spending provides essential
public goods and services that might not be
efficiently provided by the private sector
alone.
 3. Resource
Mobilization
Exploring strategies to generate revenue
for government operations and projects
while considering the country's unique
economic structure, informal sector, and
taxation compliance issues.
 Taxation

Non-tax Revenue
RESOURCE
MOBILIZATION AND
PUBLIC FINANCE Borrowing

Remittances
 4. PUBLIC DEBT
MANAGEMENT
Discussing how the Philippine
government manages its debt
obligations, given the country's
creditworthiness, borrowing costs, and
potential impacts on economic growth.
 Financing Government Operations
Public debt serves as a source of financing
for government operations, especially when
revenues from taxes and other sources are
insufficient to cover expenditures.

Capital Expenditures
PUBLIC DEBT This allows the government to fund
important development initiatives that
MANAGEMENT AND might not be feasible through current
revenues alone.
PUBLIC FINANCE
Debt Sustainability
Proper debt management aims to maintain
debt at a sustainable level relative to the size
of the economy (GDP).

Creditworthiness:
Effective debt management enhances the
government's creditworthiness, allowing it to
access financing at favorable termS.
 5. DECENTRALIZATION
considering the distribution of fiscal
powers and responsibilities among
different levels of government (national,
regional, local) in the context of the
Philippines' political structure.
 Revenue Generation

Fiscal Autonomy
DECENTRALIZATION
AND PUBLIC
FINANCE Local Expenditure

Accountability and
Participation

Local Debt Management

THE PHILIPPINE
SETTING
FINAL WORDS
Thank you
Ifyou have questions, don't
hesitate to ask!!!
 References:
Briones L. M. (1996) Philippine Public Administration, Fiscal Administration
Foundation
https://www.youtube.com/watch?v=m7wMDzkMhIs&t=6s
https://www.youtube.com/watch?v=naUGnClZ2hQ
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